Glossary

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12(b)–1 Fee

Fee assessed shareholders by the mutual fund for some of its promotional expenses. A 12b–1 fee must be specifically registered as such with the Securities and Exchange
Commission and the fact that such charges are levied must be disclosed.

12(b)–1 Fee

Fee assessed shareholders by the mutual fund for some of its promotional expenses. A 12b–1 fee must be specifically registered as such with the Securities and Exchange
Commission and the fact that such charges are levied must be disclosed.

Accreted Interest

The difference between par value of a zero coupon security and purchase price. Also called original issue discount. Yearly accreted interest is the amount of accreted
interest "earned" each year that you hold a zero coupon investment.

Accrued Interest

The amount of interest that the buyer owes the seller on transactions involving fixed income securities, such as most bonds and notes.

ACH

Automated Clearing House –
A method of transferring funds. Member banks wire instructions to the Automated Clearing House which then wires to the appropriate receiving bank.

Actual EPS, CPS, or DPS

Reported annual Earnings Per Share (EPS –Trailing 12 months), cash flow (CPS) or Dividends Per Share (DPS) for a company for the fiscal year indicated. For companies
which report on a quarterly basis, this information will contain the sum of the actual earnings, cash flow or dividends for the previous four quarters. For companies
that report semi–annually, the field will contain the sum of the previous two semi–annual actuals.

Participation by Market Makers and ECNs is strictly voluntary and as a result may offer less liquidity and inferior prices. Stock prices may also move more quickly
in this environment. Investors who anticipate trading during these times are strongly advised to use limit orders.

Agency Security

Any of the bills, notes, and bonds issued by agencies of the federal government.

All or None (AON)

A type of order where the client wants the entire order executed or none of it.

American Depository Receipt (ADR)

A security, created by a U.S. bank, that evidences ownership to a specified number of shares of a foreign security held in a depositary in the issuing company’s
country of domicile. The certificate, transfer, and settlement practices for ADRs are identical to those for U.S. securities. U.S. investors often prefer ADRs to
direct purchase of foreign shares because of the ready availability of price information, lower transaction costs, and timely dividend distribution.

American Stock Exchange (AMEX)

Located at 86 Trinity Place, New York, NY; a major stock and option exchange.

AMEX Composite (XAX)

The AMEX Composite Index – (XAX) the American Stock Exchange introduced a new AMEX Composite Index with a new ticker symbol, XAX, on January 2, 1997. The XAX is
a market capitalization–weighted, price appreciation index, and replaces the AMEX Market Value Index (XAM) which, since its inception, has been calculated on a
"total return basis" to include the reinvestment of dividends paid by AMEX companies. The new AMEX Composite Index is more comparable with other major indexes,
which reflect only the price appreciation of their respective components.

Amortization

An accounting term indicating the appointment of an incurred expense over the life of an asset. For example, if a three–year magazine subscription (an expense) is
paid in year one, it should be "amortized" (or "spread out") over the three–year life of the subscription (the asset).

Analyst

A person with expertise in evaluating financial investments; he or she performs investment research and makes recommendations to institutional and retail investors
to buy, sell, or hold; most analysts specialize in a single industry or business sector.

Annual Report

A formal presentation of the corporation’s financial statements that is sent to its registered stockholders. If shares are registered in the nominee name (in the
care of the brokerage firm), the proxy department has to obtain copies of the report and mail them to the beneficial owners (clients).

Annuity

A contract with an insurance company in which the individual makes either lump–sum or periodic payments to the insurance company and in return receives a lifetime
income (usually guaranteed).

AON

See All or None.

Arbitration

A method of settling a dispute by utilizing an impartial individual or individuals. All exchanges and securities associations have adopted a Code of Arbitration
through which all disputes between firms, employees and firms, and firms and clearing corporations are settled.

Ask (Asked Price)

The lowest round lot price at which a broker will offer for sale a security on an exchange or over–the–counter market.

Ask to Bid

Market maker or ECN went from offering (selling) the stock at the inside market offer to bidding (buying) at the inside market bid.

As–of

A term used to describe any trade processed not on the actual trade date, but "as of" the actual trade date.

Asset

Goods available to pay debts. Anything owned by an individual or corporation, any possessions that have value in an exchange.

Assign

Action of the option holder (buyer) requiring the option seller (writer) to complete the terms of the option contract. The writer would be required to either buy
stock from the holder or deliver stock to the holder.

At–the–Money

Refers to options in which the underlying stock is trading at the same price as the option strike price.

Auction

The issuance of new Treasury bills, notes, and bonds at stated intervals by the Federal Reserve.

Auction Market

A market where buyers and sellers enter simultaneous bids and offers such as the New York Stock Exchange.

Average

Also known as an index, a mathematical computation that indicates the value of a number of securities as a group. The three most popular averages are the Dow
Jones Industrial Average (DJI), Standard & Poor’s (S&P) 500, and the New York Stock Exchange Composite. The average, which may be market–weighted,
share–weighted, or price–weighted, indicates performance.

Average Daily Share Volume

The number of shares traded per day, averaged over a period of time, usually one year.

Average Maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life.

A relationship between a bond’s price and a yield subdivided into hundredths. One hundred basis points equals 1 percent interest yield.

Basis Price

A method of pricing municipal bonds, T bills, and certain other instruments. It is an expression of yield to maturity.

Bear Market

A market in which prices are generally declining.

Bearer Stocks/Shares

Securities for which no register of ownership is kept by the company. A bearer certificate has an intrinsic value. Dividends are not received
automatically from the company but must be claimed by removing and returning "coupons" attached to the certificate.

Beginning Net Asset Value

The market value of a fund share on a predetermined start date.

Beneficial Owner

The owner of a security who is entitled to all the benefits associated with ownership. Customers’ securities are often registered in the name of
the brokerage firm or central depository rather than in the name of the customer. Even so, the customer remains the real or beneficial owner.

Beta

A measure of the volatility of a stock relative to the overall market. A beta of less than one indicates lower risk than the market; a beta of more than one
indicates higher risk than the market. Nasdaq.com uses the S&P 500 as the underlying index to measure the overall market for beta.

Bid

The highest price anyone has declared that they want to pay for a security at a given time.

Bid to Ask

Market maker or ECN went from bidding (buying) at the inside market bid to offering (selling) at the inside market offer.

Blue Chip

A term used to describe the common stocks of corporations with the strongest of reputations. (In poker, the blue chip is usually assigned the highest money value.)

Bond

A debt instrument; a security that represents the debt of a corporation, a municipality of the federal government, or any other entity. A bond is usually long–term in
nature (10 to 30 years).

Bond Fund

Type of mutual fund that invests in bond and preferred stocks with the idea of providing a stable income with a minimum of risk.

Book Entry

Electronic record of ownership of Treasury and agency securities, as opposed to receipt of a security’s certificate.

Book Value

A value computed by subtracting the total liabilities from the value of all assets on the balance sheet, then dividing by the number of common shares.
This is an accounting term that has no relation to the securities market value.

Bounce

A sudden rebound in the market (or a stock) typified by a strong upward move directly after a strong down move.

Breadth of the Market

A measurement of the number of issues that advance or decline on a particular trading day.

Breakpoint

A purchase of shares in an open–end investment company mutual fund that is large enough to entitle the buyer to a lower sales charge. A series of breakpoints
is established by the fund, at each of which the charge is reduced.

Broker

(1) An individual who buys or sells securities for customers (a stockbroker). (2) On an exchange, one who executes public orders on an agency basis (a floor
broker or commission house broker). (3) As a slang term, a firm that executes orders for others (a brokerage firm).

Brokerage Firm

A partnership or corporation that is in business to provide security services for a general marketplace.

Bull Market

A market in which prices are generally rising.

Bullish

Term used to describe rising security prices.

Business Day

A day on which the exchanges are open for business.

Buy–In

When the seller of a security fails to deliver the security, the buyer purchases the security on the open market and charges any loss to the seller’s account.

Buy/Write

An advanced option order that combines the purchase of an equity and the sale of a call option on the same underlying security.

Buyer’s Option (Contract)

A settlement that calls for delivery and payment according to the number of days specified by the buyer.

Buying Power

In a margin account, the maximum dollar amount of securities that the client can purchase or sell short without having to deposit additional funds.

C

Call (Option)

An option that permits the owner to buy a contracted amount of underlying security at a set price (strike or exercise) for a predetermined period of time (up to
the expiration date).

Call Date

The date on which and after which selected issues of Treasury bonds can be redeemed before maturity.

Call Protection

The degree of security that an investor has against a bond being redeemed. Practically, the number of years between today and the call date.

Call Spread

Client buys a call and sells a call on the same security but with different expiration dates, different exercise prices, or both.

Callable

A securities feature that allows the issuer to retire the issue when desired. Should the issue be called, the issuer usually pays a premium.

Callable Bonds

Treasury bonds that can be redeemed by Uncle Sam five years before maturity.

Capital Gain

A trading profit. Trading gains that occur in one year or less are short–term capital gains; those that occur in periods longer than one year are long–term
capital gains. Short–term and long–term capital gains are treated differently for tax purposes.

Capital Gains Distribution

Payments to mutual fund shareholders of profits from the sale of securities in a fund’s portfolio. Capital gains distributions (if any) are usually made annually.

Capital Loss

A trading loss. Losses are long– or short–term as are gains. See Capital Gain.

Capital Stock

The common and preferred stock of a company.

Capitalization

The total dollar value of all common stock, preferred stock, and bonds issued by a corporation.

Cash Account

A customer account in which all securities purchased must be paid for in full.

Cash Dividend

Dividends that corporations pay on a per–share basis to stockholders from their earnings.

Cash Flow

Amount of total payments, interest and occasionally principal received as current income from Treasury and agency securities.

Cash Transaction

A settlement on the same day as the trade date.

Cashiering Department

Brokerage firm department that is responsible for receiving and delivering securities and money to and from other firms and clients.

A negotiable certificate that evidences a time deposit of funds with a bank.

Chicago Board Options Exchange (CBOE)

Listed option trading was originated by this marketplace on April 26, 1973.

Chicago Board of Trade (CBT)

A major commodity exchange located 141 East Jackson Boulevard, Chicago IL.

Class

Options of the same type – all calls or all puts on the same security.

Clearing Corporations

A central reception and distribution center operated for its members who are made up of various brokerage firms. Many offer automated systems
that expedite comparison procedures. Among these are NSCC (National Securities Clearing Corp.) and OCC (Options Clearing Corporation).

Clearing House Comparison (CHC)

A form used to submit trades to NSCC that have missed the normal entry methods. Such trades enter the system on the third business day of the trade cycle.

Cliffing

A strategy for arranging bonds so that they all mature in the same year.

Close

Price of the last transaction of a security on a particular trading day.

Closed End Fund

A fund whose offering of shares is closed. That is, once the initial offering is completed, the fund stops offering its shares. The value of the
shares is then determined by supply and demand, rather than by calculation of net asset value.

Closing Transaction

The transaction executed to close an option contract. The holder would sell to close while the writer would buy to close.

Collateral

An asset pledged to support a loan.

Collateral Trust Bond

A debt instrument issued by one corporation and backed by the securities of another corporation.

Combination

A position long or short different types of options on the same stock with different strike prices and/or expiration dates.

Combination Order

In listed options trading, an order to simultaneously buy a call and sell a put or to buy a put and sell a call on the same underlying security. Also
called a Combo Order.

Commercial Paper

A short–term debt instrument issued by corporations. Its rate of interest is set at issuance and can be realized only if held to maturity.

Commission

The amount charged by a firm on an agency transaction.

Commission House Broker

A floor broker who is employed by a brokerage house to execute orders on the exchange floor for the firm and its customers.

Common Stock

A security, issued in shares, that represents ownership of a corporation. Common stockholders may vote for the management and receive dividends after
all other obligations of the corporation are satisfied.

Comparison

The process by which two contra brokerage firms in a trade agree to the terms of the transaction. Comparison can be either through a clearing corporation
or on a trade–for–trade basis (that is, ex the clearing corporation).

Competitive Tender

A method of purchasing new issues of Treasury bills, notes, and bonds in which the investor specifies the yield, and accordingly the price, he or
she requires to purchase the security.

Confirmation

A trade notice, issued to customers of brokerage firms, that serves as written notice of the trade, giving price, security description, settlement money, trade
and settlement dates, plus other pertinent information.

Consent to Loan Agreement

An agreement margin customers must sign to authorize the brokerage firm to lend the customer’s securities to itself or other firms.

Consensus Rating

The average of analysts recommendations for a single entity. As many brokers have different ratings systems, their recommendations must be standardized so that a
consensus can be calculated. The I/B/E/S ratings are calculated using a standard set of recommendations, maintained by I/B/E/S, each with an assigned numeric value:

Strong Buy

Buy

Hold

Underperform

Sell

Each recommendation received from the analysts is mapped to one of the I/B/E/S standard ratings. Assigning a numeric value to the broker text enables I/B/E/S
to calculate a consensus recommendation. This consensus recommendation appears as the mean (average) of the assigned values.

Consideration

The money value of a transaction (number of shares multiplied by the price) before adding commission.

Constant–Dollar Investment

Securities such as savings accounts and money market funds that do not fluctuate in price.

Contractual Plan

A type of accumulation plan in which an investor in mutual funds makes a firm commitment to invest a given amount of money over a given time.

Control Persons

A director, officer or other affiliate of the issuer or a stockholder who owns at least 10% of any class of outstanding stock.

Control Securities

Securities owned by one of those parties mentioned in Control Person.

Convertible Issue (Bond)

A securities feature that permits the issue holder to convert to another issue, usually common stock. This privilege can be used only once. The
preferred stock or bond holder can convert from that issue to another, but not back.

Convertible Preferred Stock

A preferred stock that may be converted into common stock of the same company at specific prices or rates.

Convertible Zero

As it applies to the Treasury sector, a stripped Treasury zero that converts into a current income obligation five years before maturity.

Cooling–Off Period

The period, usually 20 days, between the filing of the registration statement on a new issue with the SEC and the effective date of the offering.

Co–Partnership Account

An account in which the individuals may act on behalf of the partnership as a whole.

Corporation

A business organization under the law with certain rights and responsibilities in which the worth is divided into shares of stock.

Corporate Resolution

A document stating that the corporation’s board of directors has authorized a particular individual to act on behalf of the corporation. This
document is necessary when the corporation opens a cash or margin account.

Coupon

(1) On Bearer Stocks, the detachable part of the certificate exchangeable for dividends. (2) Denotes the rate of interest on a fixed interest security – a 10%
coupon pays interest of 10% a year on the nominal value of the stock.

Coupon Yield

Also called nominal yield. A bond’s coupon payment divided by par value.

Cover

The total net profit a company has available for distribution as dividend, divided by the amount actually paid gives the number of times that the dividend is
covered.

Covered Call

A call option that is sold against stock owned by the writer of the call.

Covered Put

A put option that is sold by the owner of a put of the same class with an equal or longer expiration date and an equal or higher exercise price.

Credit Agreement

Outlines the conditions of credit arrangement between the broker and customer concerning a margin account.

Credit Balance

The funds available to a client in a cash or margin account. In a short sale, this balance represents the customer’s liability.

Cumulative Preferred

A preferred stock feature that entitles the holder to the later payment of dividends that were not paid when due. The dividends are, in this sense,
"cumulative." The dividends accumulate and must be paid (along with present dividends) before common stockholders may receive any dividends.

Current Income

Cash–in–hand payments received from interest and dividends.

Current Maturity

The number of years until a bond matures, regardless of its original maturity when issued.

Current Yield

A bond’s coupon payment divided by its market price.

CUSIP (The Committee on Uniform Security Identification Procedure)

An inter–industry security coding service. Each type of security has its own unique CUSIP number.

Custodian

The person or institution responsible for protecting the property of another.

Customer (Account) Statement

Sometimes referred to as month–end statement. This is a statement of the customer’s positions and activity. It must be sent out quarterly,
but if there is monthly activity in the account, it is sent out monthly.